One of Justin Trudeau’s big campaign promises was to dial back the annual TFSA contribution limit from $10,000 to $5,500 in a nod to middle-class voters. It played well with the media but advisors of all political stripes were seriously annoyed by the Liberal leader’s rhetoric because the move actually does the opposite.
, a Nova Scotia advisor with Assante Financial Management, believes the 45% reduction in the annual contribution limit definitely hits at the middle class; here’s why.
“If I’m a senior I’m retired and I’m relying on government benefits, maybe I even qualify for a guaranteed income supplement; or I might have had an inheritance from my parents; or I might have just been very frugal and saved a lot of money. A lot of the people I’m seeing are moving money from existing non-registered into TFSAs,” said Rankin. “It’s not all new money for rich people It’s middle-income people, many of them seniors, that are moving money from their left hand to their right hand to make it more tax efficient.”
A second problem is more general in nature and less to do with a specific income bracket. Rankin believes there’s a long-term effect with rolling back the TFSA limits.
‘This is partly a political conversation and partly a logical one,” Rankin told WP. “I did some loose math on the proposed change to the TFSA limits from $10,000 to $5,500. Based on the last 15 years of CPI and based on the way the formula used to work, it’s going to be the year 2047 before we get back to $10,000. So, you’re talking about 32 years to get back to where it was.”
In this advisor’s opinion the argument about the TFSA being a savings vehicle only for the rich is a big red herring.
“If I’m a multi-millionaire do you think $41,000 in the TFSA makes any difference to me?” said Rankin. “It’s not hitting the right people. The changes to TFSA limits are going to marginally hurt middle-class people more than it’s going to hurt the wealthy.”